good morning. banks in cyprus remain closed to avert a pape possible run on xofts. in the u.s., the battle for dell is getting more interesting by the day. now carl icahn is opening the door to a blackstone tie-up. meanti meantime, michael dell is said to be talking to the bidders. boeing's 747 test flight went according to planned.

it's tuesday, december 26th, 2013. "squawk box" begins right now. good morning, everybody. i'm becky quick along with joe kernen and is andrew ross sorkin. if you're wondering if cyprus banks matter to the stock markets, check out yesterday's session. equities fell after the euro group's head suggested that the island nation's bailout is a template for bank rescues. stocks eventually came off their low on words that cyprus is not a template, and then they sowed sold off again when the euro group leader said cyprus could very well away template. if you're confused, you're not the only one. stocks were all over the place

yesterday. they ended the session near their lows. at one point, we were down by as much as 117 poivents. if you take a look this morning as what happened with u.s. equity futures, they are higher. up about 44 points. this is similar to what we saw yesterday. if you're looking at the early trade, you'll see right now there are some gains. the cac is up by 0.75%. other markets are smaller gains than that. the banks in cyprus have been closed for over a week to try and prevent a run on cyprus. our chief international correspondent michelle caruso cabrera remains on the ground there and joins us with the latest. michelle. >> hey there, becky. yes, the banks were originally scheduled to reopen today. that is not going to happen. a very late announcement from the minister of finance and they're going to hope to try to reopen on thursday. it's unclear why this has been delayed on this point. in the meantime, when they do reopen on thursday, the

president of the company announced in a nationally televised address that when they do reopen, there will be capital controls in place. he didn't say for how long or how long. he said they will be progressively loosened. what that means, of course, we don't know. in argentina, it went on for 21 months. at the same time, this is day ten of the banks being closed. if they don't reopen until thursday, it will be 12 days. already, we have seen super markets packed because people were buying food because they fear shortag agageshortages. why? you can't pay suppliers if banks are closed. already with, the the super market association on the weekend said he thought markets were days away from having empty shelves for this reason. when we went out looking, we found one woman who brought her two teenage sons to help her because she was buying so much stuff. i asked her, why are you doing this? and she said it's because she's

from russia. >> uncertainties and, yes, i am worried. >> is that why you think you're doing this today, because you've seen this before? >> yes. i've seen how it develops and how quickly and badly it can develop. maybite i'm just pessimistic. >> she also went on to say that she was frustrated by the way russians had been depicted, that they're all seen as money launderers. she said you don't understand, living through russia, the soviet union was so bad, she said we have been screwed so many times, it's not that cyprus is so good, it's that russia is so bad. hence the reason why there's so much russian money here. >> watching how things have played out the last several days, do you get the sense that a lot of people are of that same mind-set? >> it's going to get to that point because it's becoming

increasingly difficult to get cash. and i think we also have to see the way -- the commentary that we were talking about plays out in the rest of europe because that will have implications for credit across the continent and definitely affect what's happening here. i mean, the whole issue of whether or not cyprus is a template, guys, 24 hours ago when we had this discussion, i said, look, european investors have to be on notice. what have they told you with this bailout? senior bondholders are going to take a hit. and in cases of really poorly capitalized banks, uninsured depositors, as well. they can backtrack all they want, but you shouldn't need to hear the finance minister to know what the implications are. >> and no one can devalue their currency. i've on tried to figure out how does southern europe force upon its citizens a level they can't support because they can't support a higher standard of

living than the goods and services you've paid to get. you try and tax them, the economy is slow, the tax revenues don't go down. they can't get it there. the only way to do it is through a devaluation or to do something like this. one way or another, you can't get blood from a turn yip or whatever it is. isn't that the way it's working out? >> economists call it an internaled devaluation. it's a depression, essentially. you've got to make a country more competitive. those are all the things you're talking about that are what happens. >> a single currency -- that's why the single currency makes no sense when you've got countries in the north that are growing and that are productive and they're sharing the same interest rates with currencies in the south. and your hero, milton freedman, said that right away. it can't work. michelle, sooner or later, i don't understand how this works,

either. do they take -- what do people do that can't go to the atm and don't have any cash? are they allowed to still use their credit cards or are there people walking around there that have no money? >> okay. so yes, you can use credit cards. but certain establishments won't accept them any more because they desperately need cash because their suppliers are demanding cash up front. so yes, your electronic economy will work, but it really bftsz the upper middle class and the middle class, the well capitalized parts of the economy. if you're poor, it's much more difficult. in argentina, when this happened, they essentially did their equivalent of leaving the euro. they had a dollar pay. they got rid of that. people reduced to bartering for days and they had capital controls in place for more than a year so you couldn't access your money. which by the way, against your consent had been converted from dollars to the original takeno peso. >> michelle, i was going to go

back to this template versus no template and what this all means and what we're going to see. at this point, if you wanted to put the jeanie back in the bottle -- >> toothpaste back in the tube, humpty dumpty, whatever it is we want to call it, what do you do? could the imf, for example, come out with a blueprint, a plan to walk through -- sorry, joe. >> she's been setting the table for us all morning. >> perhaps how future bailouts could go so we would have a blueprint to know what it looks like? >> this is the blueprint. >> it is. >> the imf would very much like an fdic-like system put in place that is predictable to invest s investors. the problem is getting the rest of europe to go along with it. but the bottom line is, remember, the stated goal of the european union was to get to the point where no taxpayer money would be used to fund bailouts. instead of bailouts, you get a

bailin where the private investor has to foot the bill, which is a scandalous thought in europe. you have to listen to people on financial television here. they're like, they are telling the world that senior bondholders could lose money. yeah, no kidding, sherlock. that's the whole idea, right? i mean, it's a very different way of looking at things. and before everybody says, well, the united states, you bailed out the banks. here, we're talking about insolvent banks. in the united states, we were talking about ill liquid banks, a completely different situation. >> michelle, just in terms of the grocery stores, you would think that their suppliers would trust them on credit and would go ahead and keep delivering. but is that something that you think could unravel quickly, as well? >> you're a big international supplier, are you going to let that ship dock with all the stuff and not know if you're going to get paid in the original contractual amount in euros or you're going to be handed a devalued currency down the road or you're not going to get the money at all for cash flow? maybe in your heart you want

them to do it, anyway, as a charity, but that's not a reality. >> it could get ugly fast. michelle, thank you very much. we will check back in with you a little later this morning. in corporate news, the dell soap opera continues this morning. carl icahn says he's started preliminary talks with blackstone group. both have made bids that could be superior to the sale of dell. michael dell plan toes meet with the private equity firm, but he's reportedly not a big fan for the unit to sell off the financing unit. meantime, asset management may side with blackstone, but has no interest in working with

carl icahn. i've heard the same thing. but the conversations -- the fact that carl icahn is talking to blackstone suggests that carl icahn's bid was never really that much of a bid. he would like to roll in with blackstone. and i would imagine ultimately would probably want to cash out with blackstone. i'm not sure he ever really wanted to hang out for the next five years and see what happened. >> i think he wants to put a multi level distribution system on dell. you pay distributors to buy the dells and no one actually ever uses them. >> why don't they merge dell and herbalife doing. >> he's a gut instinct guy that looks around and says, i can make trouble, get an extra buck or an industrial 50%. >> he was watching us talk about king pharmaceuticals and he was

shaving. he decides to do things on a -- motorola, what did he know about cell phones? >> if you have that much money on, you can throw your weight around and is make yourself be heard. >> he was down to hundreds of millions from billions and now he's like ba like 20 billion or something. >> yep. >> amazing. >> and here we are talking about him, very seriously. >> and he has no idea. >> because he's sleeping. >> he's so asleep. >> so you can say whatever you want. >> there are dvrs, although i don't think he's dvr'ing us. trying to get used to the jacket? are you going to -- >> no. you know what happened? we usually stand for the -- >> but you knew full weren't you weren't standing any more. i'm fine with this because i think one thing is clear but say, we all like ouch other. do we not? we do. >> we do.

>> i can wear a dress and you can wear a jacket. if there's any question with anyone, we right here like each other. do we not like each other? >> point made. we get it. >> we can all hold hands. a little kumbaya. >> i have a better idea. let's rub tootsies. >> oh, stop. i don't want to feel your -- >> they prevented us from doing this on purpose. >> you can't reach? >> though. i have a thing in the way. >> i can reach you. that's kind of weird. >> i have a hole in my sock. but anyway, boeing said that the first test flight of that reworked battery system for the 787 went according to planned. the company will be able to move on to formal testing, and the second flight test will gather data for the faa now. the government agency must

approval the dreamliner before it can be used for service. at 2:30 wk economists are looking for an increase of 4%. an hour later at 10:30, we get new home sales, consumer science. this morning, the futureses for the dow is up. oil prices yesterday closed at the highest level in over a month. this morning, they're trading you up another 44 cents to 95.25. the ten-year note this morning, yield i yielding 1.932%. the dollar is up against the yen. the euro is trading at 1.2866. signs of concern when you look at what's happening in europe. gold is down, $1,596.20 an ounce. in market news, we have a bit of a kelly evans special. the new bank of japan governor

saying that the central bank is going to seek to push down market interest rates by purchasing longer data government bonds, expand its balance sheet and more aggressively see deflation. kelly evans was early on the whole japanese story. >> she was right, yeah. >> it's now time for the global markets report. >> we have ross westgate in london. ross. >> hi, andrea. it's on really cold. >> we're weighted to the upside, not by much. six to four, advancers outpacing decliners. you can see we started a little bit softer. we've gradually tried to crawl away at the upside session. with easter coming and all the markets closed on friday, the u.s. markets, are, as well, just to recap where we stand right now, the ftse 100 is just above

the flat line. up 7 points, 22 points higher on the xetra dax. the ftse mib fairly flat, as well. we have got five and ten-year auctions coming out of italy in the next couple of days. we'll keep our eye owes that. there are two corporates worth looking at today in terms of a report. the first one, this is a building supplier and plumbing company has over 50% of its revenues from the united states. the reason the stock is down is because they had a 20% fall in pretax profit. the weakness, as you might expect, coming from europe. very weak housing in europe and a lot of price pressure in the uk, as well. what they have to say about the united states is interesting. there their trading profit is up 29% and they say the u.s. recovering in housing is continuing quite a pace.

bmq, the biggest home improvement retailer, it met forecasts, but basically saying we have a big squeeze in consumer income, selling big ticket items is particularly vulnerable and the where are is not helping them out, as well. that's where we stand right now. back to you. >> ross westgate with the latest there. >> oh, we miss you, ross. >> we do. we love you. we've got ross westgate, reynolds wolf. you could get confused, if i was ron burdgundy. are you okay, ross? >> yeah. >> he misses kelly a little bit. >> ross, when are you coming back to the united states to visit us? >> what do you think? may is good, right? >> may. >> the weather is good. >> we'll see. we'll see if spring comes. okay.

anyway, kelly was in paris. you have to report back on whether she had -- because that was her first trip there. >> did she actually go through paris? >> she did, finally. coming up, one of the original "squawk box" disrupters hits it big. a teenager sells it big to yahoo!. first, a look at yesterday's winners and losers. [ female announcer ] it's time for the annual shareholders meeting. ♪ there'll be the usual presentations on research. and development. some new members of the team will be introduced. the chairman emeritus will distribute his usual wisdom. and you? well, you're the chief life officer.

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welcome back to "squawk box." dow is set to up 44 points higher and the s&p 500 is set to up about 5.5 points higher. making headlines this morning, i think we should be proud around the table. we have one of the original members of the "squawk box" disrupter's club made it to the big leagues. 17-year-old nick delisio sold summly app to yahoo!. reports put the price tag at $30 million. he first thought of the idea for the mobile software while studying for a history exam two

years ago. went on to create a prototype of the app that distills news stories into chunks of texts readable on small screens. the entrepreneur was on "worldwide exchange" earlier this morning. >> i'm really excited about joining yahoo! with summly because i think it's one of these classic internet companies, and it has new leadership under marissa mayer. and having spent some time on campus and spoken to their team, it's clear their strategy on mobile, daily habits, news, information, weather, they have all these assetes and all they need to do now is package it up in a beautiful experience in the mobile device and there's a real opportunity there. so we see summly fitting in perfectly to that model. >> what is that look on your face? >> he was smart and very well spoken. dick kohey was watching this interview earlier on "worldwide exchange." what did he say? >> they asked him what i was going to do with the money. he said maybe i'll buy a

computer. they said what about a car? he said i'm not old enough to drive yet. >> brat. >> i was so impressed by him. >> that's when he was down to earth and -- i bet he still is. >> that's pretax. after tax, 15 million. >> you're right. i do. i do. alex wallace, we're going to get the national weather forecast and i'm interested in this, alex. >> it was the lead story on nightly news. >> it comes quickly. it will be here. it's not like it's not going to happen, right, italy? >> eventually. spring will happen, it's just going to take its time. mother nature works her own calendar. as you look at the map behind me, it certainly does not look like a spring map at all. we have a lot of white indicating snow and we're finding that all the way down, even into the northwestern suburbs of atlanta. there have been a few snow flurries here this early morning. that will be the case as we move

through the day. the tennessee valley dealing with light snow. temperatures remaining chilly, all the way into florida. tampa, 358 for your afternoon. despite the sunshine, it's going to be a cool one there. moving into the middle of the nation, a very dry time for us from houston into the upper midwest. minneapolis, your high. around 38 degrees while we move to the western half of the country. most of us saying quiet from seattle down to los angeles. 70 for your afternoon there in southern cal. that warm-up, we're waiting for it and today it's not going to happen. atlanta, you won't get out of the 40s. 351 n for little rock. these are areas that should be up into the 60s for this time of year. our trough that's brought in this combed air will eventually start to lift north. by tend of the week, we'll start to see some warming. not necessarily for the northern tier of the country. but the southern had a will certainly feel a little warmer numbers. atlanta at 64 with little rock up to nearly 60 degrees.

guys. >> alex, thank you. we're still trying to be patient. >> we had no -- it was spring and winter last year. >> i know. but it's -- >> you know, this is the thing with variability. that's why there's a mean. >> i'm tired. it's been so long, long -- >> we had no winter last year, becky. >> it was one of those very, very warm ones. >> i want spring to happen now. >> normal variability. >> when you have three kids in the house, you want to get outside again. >> that's true. three dogs and a muddy backyard. hideous. it is. >> i'm ready for spring. >> i'm going out, forecast ago trend for warmer weather in the next several months. >> really? >> yeah. >> i don't think that's -- we had a warm year last year.. we could definitely have a colder year this year, i think. >> i think he thinks it's going to be warmer three months from

now than it is now. >> oh, yeah. that's like a lot of your -- >> forecast is inevitable. >> you've been doing this a long time. you've learned. >> absolutely. i was a chief economist, we wrote a lot of highly recommended letters until we needed one ourselves and then we went belly up. gentlemen, we've been watching what the markets did yesterday and trying to figure out what people really think about this situation in cyprus. and, dick, is this a template? is that a good thing, a bad thing? when we came in yesterday, we were saying it's a deal, it gives us a template and we were following now some sort of rule of law. >> it was a very unimpressive performance by the european policymakers, but in the end, the parliament of cyprus saved them from a stupid solution. initially, they were going to default on their depositor

insurance for regular people with under $100,000 euro. which would have been an incredible mistake. >> but is what they actually did -- >> and it's the sectors of parliament that protected the policymakeres from a very, very stupid plan. >> is it a plan or a template? >> the finance ministers are instructed, when they take their oath of office, that it is their job to lie when necessary. the problem is, the finance minister of netherlands broke that code and said the truth, which is we may be doing this in the future. but because the ecb has flooded the system with enough liquidity, we are much less vulnerable to contagion today than we were a year ago. i don't think this is going to set off a big contagion in europe, but it's still a pretty unimpressive performance by

these european policymakers. >> bob, if you try and foirth what's happening to the global economy right now, i've heard a lot of economies, and a lot of things that talked about how things have slowed a bit around the globe. do you worry that europe pushes in one direction or another? >> earlier, i was probably more optimistic than everybody. now i'm a bit more pessimistic than anybody. i'm kwernd about the big drops. i'm not running a dshg that the job growth hasn't picked up. the data we're looking at this year is comparable to the data we saw last year. those aren't the numbers that were there. trend hasn't improved. and then you look at this stuff in cyprus and sicyprus has to b chilling. a wrote a note yesterday that said they bailed out cyprus. is italy next? people in italy have rejected austerity. the people, okay? and up until now, the europeans have played this elitist game where the people in charge, the

legislators in charge, the president, the prime ministers have been able to jigger things around to do what they want without ever calling anything a change in the treaty so it never had to be voted on. everybody knows there's a lot of unpopularity if they have to put something to a vote to the people. not just in italy. but in italy, the people are in control. italy is potentially much worse. what they've done with the banks in cyprus have to make you worry about what they're going to do to solve your situation when you have a problem. this isn't a template, but cyprus is a special thing and spain and portugal are a special thing and italy will be a very special thing. >> they can't devalue, so people need to lower their expectations for the kind of life they can lead and they don't do austerity because when they try and do austerity, you don't get the

revenues. so how do you do it, other than taking depositors' money, how do you do it? >> this is the fred flint stone solution. you just sort of go back to where you were. the italians is made it clear. this is not going to happen. >> right. it's not going to happen. >> there's an argument to be need that what happened in cyprus is a blip. we don't care. it falls off the face of the earth -- i'm going to get in trouble for saying this -- in the grand scheme for the economy, it's horrible for the people in cyprus, but in the grand scheme of the know, okay. if this happens in italy -- >> it is private sector wealth in italy is 9 trillion. >> the government had is about 2 t trillion. so this is not an ability to pay problem in it will i. this is a willingness to pay

problem. and it's also a willingness to reform because they have such rigidity that the problem in italy is absence of growth. it's not really excessive debt. it's not a big budget deficit. it's that the italian economy has been dead flat for tenl years, me need toty away all this rigidity in order to grow. ets, you know, europe really has to focus more on growth, which is official speak for too much austerity, folks. this is the is not working. to my mind, what you see is they haven't made much progress on this reform and opening up. they need a reagan. they need a thatcher. they need somebody who is going to go for the supply side, let's grow, let's deregulate, and they haven't made much progress on

that. and so all this focus on the debt takes you away from the fact that italy hasn't grown for ten years. if it doesn't grow for 20 years, this debt problem is really very difficult to cover. growth is the issues for italy. i do not think the european union has good policies that give them good growth because they have all these rigidities built into the system. unlike america, wherefore both or worth, if your boss doesn't like it, he follows you and moves on. >> pocket lint, have you used that before? is it for no money or something inconsequence? >> inconsequence. >> can i call a person pocket lipt? >> i don't know about that. >> just consequence of money. i might use this, you know, with someone i don't like.

you know, like a -- >> no. he has a patent. >> you do? >> yeah. he has a patent. >> so you're thinking it's -- >> if i answer -- >> i know exactly where you're going. >> coming up, economic stats in the u.s. fears about cyprus abroad and the early read from futures pits. we have all that when squawk returns.

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it's just another way you'll be traveling at the speed of hertz. welcome back to "squawk box." kevin ferly is standing by at the cme. >> good morning. >> template or no template, what does it mean for the markets this morning? >> template? no, no template. here is what we see going on in the futures, andrew.

basically, now sthl be the seventh session of what we call unchanged values. the market moved up a week ago sunday night on the first moves and we've been watching back and forth inefficiently in the same range every day sips. so given that the story has changed somewhat over the time period, i would say that the market is not an equilibrium and most traders are pushing on the extremes of that range waiting for it to break out one way or the other. >> what is volatility like? i assume that's gone up, or not.? >> overall, people continued to many hear it down. i think that adds to the attenuated type of problem that could take place, which is the only time some people read stability is the idea that spreads are tight and volatility is low. so you have this thing. whenever it xwloes out or moves out, it's perceived as a crisis. and you're seeing that kind of right now with the headline

information. >> so if you think about headlines, i don't know if you heard bob brusca earlier, he's a little less positive than he had been. then you add in cyprus. over the next two or on three weeks, will we get a better sense of where things are at least from the european crisis perspective? >> two weeks? no. the template is, there is no template. what we talked about two weeks ago, the thing about italy, italy's experience with the valuation, unlike thailand and some other countries has been a good one. so after some initial panic, they've been able to make competitive advantages with prior cycle devaluations prior to the euro. so they're going to be a little bit closer to the idea that, hey, if this goes on for a couple more years, we're out. we'll go it alone. but the key is, these are things

up the road for a long time from now.. and so i just think you need to dial it down a little bit. the dollar is an extreme bullish position for traders right now. the yen has been relatively well behaved. we felt that the yen should be short squeezed much more dramatically than it did. and i think you'll see 1565 or something by the end of the quarter for the s&p. >> kevin ferry, thank you. >> that was fun. >> when we come back, all aboard. we are talking trains, planes and shipping giants to transport index now down six of the laugh sessions. we're going to find out about the global economy when "squawk box" comes right back. it's a brand new start.

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the dow transport has been on a wild ride this year, cruising for all-time highs. joining us from st. louis, donald brock. when you think about the transports, don, sometimes i think we ought to split it up into different components because they have such different business models. we saw fedex was a little disappointing, but it was because the high end, people were waiting a little -- i guess they didn't need to do it if they didn't absolutely positively have to be there. but then you look at trucks, you look at trains, is it possible to talk about it monolithically? >> yeah. i don't think so, joe. you and i have talked about this for years now. if you look at overall truck tonnage, overall truck tonnage is telling you right now we're in a slow growth, no growth economy.

february's number was up 0.5%. truck tonnage is growing to maybe 1%, maybe. tonnage. a number of loads actually moved because the loads are heavier, it's more industrial moves. they're down over 1.5%. so that is not good. >> that's bad. >> but certain segments -- >> how about rail? >> rails, you're seeing kind of a buy for caisbifurcation, if y. you've seen a big improvement in chemical shipment, a big improvement in oil because of fracking. but overall, rail is still down. it's now down 7%, 8% like earlier in the year, but industrials are still down 2% because coal is week and other parts of the economy is weak. >> then you have pricing in the airline industry for the first time ever, it seems like, right? >> if you cut capacity off. my common -- i'll tell you all about that. >> mergers, there's only a

couple of them left? >> well, if you cut capacity -- all of these in the end are at least commodity-like services. >> everything you're saying indicates to me that you think the transport res ahead of themselves. if the transports are ahead of themselves, then i wonder if the industrials are ahead of themselves. >> well, that's a great question to ask because the bottom line is, unlike when andrew ross wag suggesting earlier, you can't put the jeanie back in the bottle. >> humpty dumpty, you can't put him back together again, i'm sorry. >> yeah. >> but it has to be a couple more. >> all the king's horses and all the king's men. >> they've already left the barn when you close the door. >> but the bottom line -- exactly. the way it works is the train moves, not the station. the bottom line is, if you're not seeing an increase in goods flow, then you can't predict 14,000 dow. you can't predict the economy's robust. right thou, the transports are

continuing to, unfortunately, tell us that it is a slow growth/no growth economy unless you're either fracking, you're intermodal or e-commerce. >> do the transports still move on that? >> they do to a certain degree but, you know, the bottom line is that all transports have gotten much, much better. >> yeah, yeah. >> that takes a lot of it out of it. >> but if we bring up that chart again, is that fedex? when did this happen on the transports? because it did -- >> fedex. >> fedex to a certain degree, but you know, there was another big player that got shot across the bow that day and that was caterpillar the. >> that was who? >> caterpillar. >> that is not a transport, though. >> yeah. but it's a big industrial. it's a global industrial. they said 13% down sales, they said 25% down in the region. >> so, if we're using the transports as a gauge to the

economy, is the fed wrong? are we not going to get the kind of growth that people are expecting at this point? >> well, becky, far be it from me to tell us that it's wrong. however, i like -- in front of freight flows. freight flows are telling me it's a slow growth economy unless you're in ee modal, commerce or fracking. thoughts parts of the country are working very well, but the rest of the economy, it's slow growth and no growth. >> wrong about their forecast, right about their 85 billion a month. >> wrong about the economic forecast. >> but right to keep their pedal to the metal. >> well, the fed is in a tight position right now. they cannot afford for interest rates to go up. it will turn the portfolio up his down. santelli talked about this at length. a 1% increase and the rate will generate a $250 billion loss in

their portfolio. real money. >> all right. you just gave us a lot of possible reasons in terms of the transports, done. thanks. >> in cyprus, they have to pay for groceries. i heard you talking about that earlier. in the u.s., they have to move things via truck. >> all right. thanks, don. >> thank you. >> how are you doing? >> i'm okay. i like that the train has left the station. >> horse is out of the barn. humpty dumpty. >> there has to be something else. i like toothpaste back in the tube, though. >> you can't possibly -- >> no way you can get it back into the tube. never happens. >> if you have any ideas, shoot us a sweet. >> if you're mean, he's going to call you pocket munch. >> up next, the flying spur. and for $250,000, it could be yourself. we've got an exclusive preview

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welcome back to "squawk". we're getting a sneak peek of the bentley flying spur this

morning. joe's hands are flying as well. it is making its u.s. debut ahead of the new york auto show. cost just a little more than $200,000. joe, what do you think? 200 grand. reasonable? >> it's a nice looking car i think. >> george is bentley motors president and coo. are we looking at the vehicle right behind you there? >> yes. right behind me. good morning. right behind me is the new bentley flying spur. >> and the price tag is over $200,000? >> it starts at $200,500 to be precise. >> what are the bells and whistles not included in that price? >> you can commission your car the way you want it to be

commissioned. so you can add a lot of convenience packages and of course you can choose the way you want to create your project. >> this is a serious question. is this a car that someone is supposed to drive or they're supposed to have a driver for? >> bentleys are for enjoyable to be driven. this will reach a maximum speed of 200 miles per hour. at the same time if you want to be driven you have all the convenience and technology you need to enjoy a nice time in the backs. there is a new system with wi-fi. you can browse the web. you can simply relax and have your seat massage.

>> that sounds like i need the driver so i can sit in the pack and hang out. >> how many of these do you hope to sell this year? >> we do not make any forecasts at this point. it will be available in u.s. in july. last year we have grown our business 23% in the u.s. we expect to continue this year. >> christoph, what's the relationship with porsche? you're both under the volkswagen umbrella. do you do things together? there's a twin turbo bentley. does porsche have anything to do with inspiring the workmanship on the bentleys now? >> of course we are part of the

same group, iconic brands. we are sharing some technologies. but it is unique to bentley. porsche is part of the same group. >> interesting. i was thinking about a mini van. this could be a family car. >> i said you were destined to drive a mini van. >> hey, hey, hey. what's wrong with a mini van? >> christoph, are you planning on manufacturing a mini van. >> do you have a family vehicle? if you have a family of four,

can i get in this car? >> yes, of course. if you have four people, five people you can use this car. >> i don't want to put car seats in the back. i don't want to ruin the the beautiful leather seats. christoph, thank you for joining us this morning. good luck with the vehicle. it's quite an extraordinary car. we will see you hopefully very, very soon. >> he must be from down south? what is that, georgia? >> you're kidding, right? >> do you want me to ask my dealer about a bentley? >> i'll be okay. >> all right. you can lead a horse to water. >> nothing wrong with a mini van. >> did i say it in some kind of disparaging way?

>> i want to to get a mini van so bad. you can't afford to miss our next segment. why beyonds are good for stocks. welcome morgan stanley chief investment strategist david darst and jim keenan. zap technology.

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issues that could issues that could affect your investments from europe to key economic data. "squawk" brings you the information you need to make sound investment decisions. we can tell you what it means for your investments. >> and tech battle in today's

money madness round. microsoft versus google. you decide who wins. second hour of "squawk box" begins right now. ♪ coming to america >> good morning. take a look at the futures right now. we have green arrows after a see-saw of a day yesterday. s&p 500 up 5.5 points. some of the morning headlines this morning. banks in cyprus will remain closed two more days as authorities worry about a possible run on the banks. atms have been operating but many have run out of money. more from michelle caruso-cabrerro coming up shortly. and the u.s. economy is moving

forward although he says it's slow. he told a financial crisis in abu dhabi he's confident it will keep growing at its current pace at 2% to 3% annually. carl icahn is talking to blackstone group and possibly teaming up to buy dell. stock now trading way over 13.65. it should be somewhere in the mid-14s at this point. >> given the movie scene and the averages, i think there's nothing wrong with getting a lot of opinions about what to expect day in and day out. that's what we do. news out of europe is the latest to put pressure on the markets. opinions from two guys doing this a while. jim keenan and david darst.

david, i don't know if you sleep well or not. but if you're like head of wealth management at a place like morgan stanley, you know, you have a lot of responsibility. you're managing wealth for your clients, right? >> yes. >> are you ready to tell us what to do with our money? >> you know, it's funny, joe, i tell all our advisers, 17,000 of them, we need to have a philosophy. like your old bos bos jack wels used to say, able to be written on the back of your business card. asset protection is paramount. the second word is protection. correlations are critical. it's not -- if you have a bunch of airline and transportation stocks they're going to move together. they all move together in 2008. you need cash, inflation, precious metals. things that zig when other things zag. oil and the asian debt crisis

was $11 a barrel. you could not give it away. it was $22. when something has been weighed down for a long time you want to nibble at it. when things have been up like japanese equities in 1989, the dotcom in 1999 you want to start to take something off the table. and finally, the fourth thing, everything is driven by fundamentals, evaluation and psychologist. when you can make a for cher or lose your shirt, psychology is by far the overriding influence before you turn away from me i want to present you folks this is a squawks box. >> yes. >> and i want to give you this because this is our favorite from morgan stanley which has been recently retired. >> oh, my gosh. >> this is a real "squawk box". your viewers should know what a "squawk box" looks like

everything is done by computer. >> you don't have a meeting in the morning anymore. >> skwroerbjoe, we love this sh. we love becky. we love andrew. my daughter said, dad, how do you like your cell phone? i said, honey, that's a computer with a phone attached. 60% is no longer verbal. it's looking up things and e-mails and texts. >> do we have a dated name now? there are no more "squawk box"? >> it's a conic. >> thanks for bringing that in. >> now we know how to do it. putting all that together. just talking about what we have seen in the dow. do you think it's been justified, the move we have seen? it's been a bit of regress since we had 12 years of underperformance. would you stay long here?

>> well, on a long-term basis you have deleveraging, the shrinkage of balance sheets by households, banks and corporations. you have had the shrinking down. corporations are sitting on so much cash. you have deceleration. we're at a slower growth rate. because we have so much debt. finally, the leveraging, deceleration, and dysfunction ality. those are you see these fiascos and farces by washington. >> maybe decelerating in terms of over a period of time but it's accelerating compared to where it was. >> you have the h.e.r. housing, energy, resurgence of were manufacturing. money is -- people are bringing me stuff back from china and mexico.

we're undergoing a tremendous renaissance. longer term we have these big issues. over the short-term, there's six things. a bear market checklist. i don't see them. are valuations stretched? no. is there investor euphoria present? no. is a recession looming? no. are bond yield spreads widening? so 0 for 6 right now. >> you report to fleming? >> yes. the greatest boss i've ever had. >> you know who you will be working for soon? kleminsky. >> my new best friend. >> he's a little more grizzled. >> that's a good word. >> what is your area of expertise?

you have to bring it to equities if you can a little bit. >> yeah. >> or at least the world in general. >> you look at the economic environment and what types of risks do you want to own in that economic environment. and you have to look at fiscal policy and monetary policy in the same way. the last five years every investor has been worried about their cash because they haven't wanted to own equities because they are worried about the armageddon skin narrow. >> right. >> so what happens you start to buy insurance. put options or you hold cash or buy 30-year treasuries. you know, after the policies from the ecbmt or the fed program you have derisked a lot of that. now people are reducing their insurance. that means cash is coming off the sidelines. >> the fed is forcing out the curve a little bit. >> the fed is reducing the probability of the systemic shock. >> okay. >> in which case investors are

looking to do other things with their money. the yield curve is. now people are putting more money into equities because of the evaluations. david said it before. you're still trading 14 times forward earnings. equity risk premium still looks yield. ie, bonds look attractive. >> they were very attractive, then not attractive. >> are they high yield at this point? >> the misconception is the high yield market sets the yield. the treasury market sets the yield. lack of economic growth or lack of inflation is wise yields are low. so 90 basis points is the reason all yields are low. we are going through a deleveraging cycle. that's lead to go a slow growth environment, in which case yield curve is low. >> you would think if it got slow enough high yields go go

up. >> getting your return from credit risk. >> okay. >> if you thought about 2007, they traded 250 over. for the additional risk of taking on high yield bonds you charge an additional 250 basis points over the five-year treasury. today you're at 500 basis were points. so you're stim double the yields than you were in 2007. and i would look and say the risks of the economy are less today than they were in 2007. not that we don't have a debt issue. but if we look how we're deleveraging, it's much slower. >> i'm not going to remember because you didn't have four ds, 3s or an h.e.r. >> i know all about h.e.r. i want to know about h.i.m. >> what that like an a zombie

apocalypse? it wouldn't be that bad. >> we watch "the walking dead." >> what are you doing sunday nights at 9:00? >> sunday nights at 9:00 i put my kids -- >> sunday nights at 9:00. he has four kids and one of six kids. i told him over there he ought to learn what causes those four kids and back off on sunday night. that's what i'm saying. >> oh, my god. all right. >> you have four kids? what's the age range, jim? >> 7, 6, 5, 2. >> oh, my gosh. >> that's what he's doing sunday nights. >> you're wearing a lot of makeup to look this good. you must have a couple of nannies? no? you got a valet? >> no. >> that having been side, we are lightening up on junk bonds, high-yield bonds. >> why? >> because they are at record high prices and record low

yields. forget the spread. because of the five-year, it's been pressed down so much by the fed we basically have a taken a little off the table. we still have an allocation of 2%. >> not reflecting enough credit risk. >> we have you here the next two hours to talk about these things. that's good. we're going to continue this conversation stkpwhreu love him and i love notre dame where i went to school. >> oh, yea. good for you. >> you never know who is going to show up. i didn't pick them. i wasn't stupid enough to pick them in the brackets. >> i did. we're going to continue this conversation. but let's add another voice. higher bond yields will hurt stocks. but one investor said that may not be the case. wells capital management joins us right now. when i first heard you talking about this it really caught my

attention. this is not the way most people are looking at this right now. let's lay out why this may be the case. >> right. well, you know, becky, i think we were all concerned about what's going to happen when the fed starts to exit, bond yields move back up. if you look back to 1950, what's interesting post war period, there's been two distinct relationships with what happened with bond yields and price multiples. if the were bond yield is above 6% it's clear when yields rise, multiples come down. and higher yields are tough for the stock market. but for yield levels below 6%, we're clearly there today, what you have is when yields rise, multiples rise as well. it's a very strong positive relationship. and i think if you look at the two different periods of post war history, the 70s, 80s, 90s when the yields were almost

above 6% we came to learn when the stock market troubles as markets come down. but there's different periods. if you look at the 50s and 60s, yields rose throughout that period. and i think we're kind of back to that period we're way below 6%. we can have rising multiples as well. >> i would normally agree with you on that. it sounds like a very sound thesis. i get it. i'm concerned this time may be different with the massive fed balance shots. good news, if they start to raise rates it will be because the economy is growing. that's great news. we want to see that. it will be a tricky dance to pull this off. >> and the massive amount of rates. 4%, 5%. that means 34% of the federal

budget would be interest. >> part of it is it do you look at not only the levels but the rate of acceleration. >> seriously, if you just look at the data. on average we've been 4% yields since 1950 in that period of time. the average p model has been 14 times earnings. but it rises when the 10-year yield ranges between 4% and 6%. there's a strong relationship that when yield from below 6 up to 6 multiples go up. in the '70s, '80s, '90s the investment community was mostly worried about inflation. when yields went up we were fighting inflation. but this culture we have today is worried about depression and deflation.

when yields go up it connotes more health in the economy. you're willing to pay up. that same mentality existed after world war ii and the deprescription. we had two decades of rising yields and pes as confidence aoe merged. i think we're in the same position going forward. people will be surprised that once the fed begins to back away we might get higher yields but higher evaluations. >> if you expect a dip in the short-term? the second we hear anything you're not expecting things to go high. you're expect to go take a little bit of a plunge and go back up? how do you see this? >> certainly there's going to be headline reaction from traders if the fed comes out and announcing an exit strategy. but i really believe when the fed starts to show confidence in the future of the economying a

we think it's good enough we can back away, i think that's going to build private sector confidence. in fact, the fed may be holding back the stock market by not exiting as opposed to staying the course. >> they said if you're looking at the economy, just based on the number of truckloads that are out there. he said we're in a low to zero growth. if that's the case maybe the fed is doing the right thing by staying in there? >> well, i don't think. i think we're growing 2.5%, 3% in the first quarter. you're seeing people already raising estimates. one of the things we're already finding out is the u.s. economy is doing better than people thought. that's running into the stock market. i would even argue this is starting to happen. the s&p up 13%. 10% of that was a price earnings multiple. this year it's up 10% and maybe

7%. >> i always have to hand it for you for your out of the box thinking. you're trying to do things that aren't necessarily implicit. you try to think out of the box. but the idea that the fed and all this money is not helping prop up equity prices. they take away the punch bowl. maybe down the road we get the confidence and take the training wheels off and the market goes higher. that's crazy that they aren't benefiting from 85 billion a month. >> i think you're right. there is certainly some benefit from the fed. they have certainly helped this economy recover. i don't deny that at all. i don't agree that in the last couple years that's helped much. the money supply is only growing 6% to 7%. it's not exploding. what's exploding is excess bank reserves. i don't see what good that apart out in the economy to begin

with. >> jim, thank you very much for joining us. safe flight. >> thank you for having me. >> he told his pilot i will be there in 10 minutes. >> he's filming from the plane. >> please. >> coming up next, cyprus pushing back the reopening of banks in that country. an update on how that's affecting investor confidence in europe. >> and america's apple pie. the results of cnbc's all america survey from u.s. consumer to business to the fed and beyond. fireworks just minutes away. stay tuned. ♪ ♪ ♪ the new blackberry z10 with

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cyprus keeping its banks closed until thursday to prevent a run on deposits. they have not been open since march 16th. that is putting a strain on the country's businesses. michelle caruso cabrera joins us with more. is it nikosia? >> that's right. >> nice place? >> it's lovely. the weather is lovely. sunny desert. it's warm during the day, cool at night. i love it. people are nice. >> really? >> do you want to hear about the the banks?

>> i do. but this is one of the weirder places you have had to go and spend three weeks. not many people spend three weeks in nicosia. >> that's true. last night minister of finance said they couldn't get it done by today. you have to move cash into the country. integrate computer systems, et cetera. so we're on day 10. if they reopen on thursday, that will be 12 days without banks. nationally televised address last night and he said when they do open there will be withdrawal limits. it will be difficult to get money in and out of the country. it is putting a strain on businesses. they are stressed how they make payroll. they can't. how do they pay suppliers? they can't. people will start to worry about

shortages. listen to what this one woman told us. >> i hope the banks soon open. >> of course that was a man not a woman. so there's a whole debate what happened in cyprus, the the way they shut down the banks. is this a template. all of europe is very concerned about this. i don't think anybody should be in doubt that the way they resolved laiki bank here in cyprus is absolutely going to be used across the rest of europe in the future. they have a problem with insolvent banks. and a lot of individual countries don't want to shut down their individual banks because it's not politically expedient in those countries. it will be some kind of continental banking regime. this should be absolutely seen as the model. now, will uninsured depositors lose so

much money every time? hardly. remember, the capital structure of these banks is not comparable to nearly any other banks we have seen in europe. there's a lot more cushion at the bottom. senior debt holders, junior bondholders to keep them from taking brutal losses due to bad loans. >> david darst and jim keenan. why david likes apple. t-mobile ditching its contract plan. the first major carrier in the u.s. to do so. will others follow suit? details after the break. [ penélope ] i found the best cafe in the world.

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you can rent a car without a reservation... and without a line. now that's a fast car. it's just another way you'll be traveling at the speed of hertz. ♪ ♪ >> welcome back, everybody. we have been watching the futures this morning. they are indicated higher after that roller coaster ride from yesterday. the dow futures at this point look like they would open 42 points above fair value. s&p by just over 5 points n. our headlines on this tuesday

morning, investors are keeping an eye on developments out of cyprus. as that's happening, two ecb governors saying this was not a bailout. they have made remarks of paris. markets lost their gains yesterday on the suggestion that cyprus would be a template like this. in fact, we bounced all over the place. it was all based on what these guys were talking b. new jersey's revel cicinho has filed for bankruptcy. they said it might take four years to reach profitability. the casino plans to continue normal operation. >> can nobody do a casino in atlantic city it. >> was hit by sandy. this was a different plan too. just a different plan in terms of trying to roll in high rollers and not have --

>> you need a big atlantic city resurgence. have you been to a casino in atlantic city? you've been to vegas. >> i've been to vegas. >> you're in atlantic city, you're like, wow, i'm in vague as. you walk out and you go -- i mean, you don't want to go -- i don't know. it's not a place you want to hang out i don't think. >> the boardwalk they kept that contained. >> they need to fix up atlantic city. because you feel like you're in vegas. the casinos in vegas, you don't want to spend all of your time. >> you walk outside and you know you're not in vegas. you're not in kansas anymore. >> great history there. >> yeah. >> boardwalk empire. >> so nice. >> there's a great history. i wish you could find some way -- >> you don't want to go gamble

with your life. >> i don't want to gamble anywhere. >> but you want to be able to get back to your hotel. >> if you could stay in the casino i guess you could do that. >> one more headline. general motors kicks off an effort today to try to revamp its buick brand. new versions of regal and lacrosse models. t-mobile usa is turning off its cell phone contracts. number 4 wireless company is the first major u.s. company to break away from the contract model under its new plan customers could save money in the long run for a samsung galaxy 3. pay $70 up front and $90 for unlimited data and text. when the phone is paid off that fee would disappear.

so you're not going to get stuck. you guys -- how does this change the business? do you think at&t and everybody else goes like this? >> it's hard. when you think about the hardware turned to apple and samsung. they're trying to reduce the costs to subseu tkaoeuz the hand sets. >> do people feel locked in anyway? >> you want to buy the a canadian. buy your canadian telecom companies with much greater yield. >> what are they? >> simon flannery. i'm restricted this morning from mentioning the leading one. >> roger is the leading one? >> it's one of the two.

there's another one that's bigger. but i can't say the name this morning for restricted reasons. you're viewer would be sell served to take a look at that. simon flannery likes the big canadian telecom career can which does not have these problems. we like apple, andrew. they're going to basically raise the dividend. katey hubert has a $620 price target. it's down 13% for the year so far. everybody knows that high was 706. china mobile has 700 million subscribers. number three is a smart tv or smart watch. some new product. number 4 is cheaper iphone and cheaper ipad. those are the four drivers. there's many catalysts. you're always talking about catalysts. many catalysts will be coming

down the the pike. they're sitting on $137 billion of cash. >> dell in the news. you take the black stone bid. what is happening here? >> this is emblematic of the united states reinventing itself. this goes back to h.e.r. this is a restructuring story. the the whole lbo that nothing is too sacred to take it apart and fix it again. this is a big green light. or independent to basically take it and make this rise from the ashes. the united states should be called phoenix of america. >> wow. wow. you're talking -- >> you've got to believe.

>> you're talking to someone in the past you have expressed a lot of doubt. >> i have expressed doubt about dell. >> not dell. the united states. >> i have not expressed doubt. >> about always being in america. you think it's different now. you think the average person can't succeed. >> it's been very tough. >> where else? >> mexico. go to mexico, japan. >> you want to grow up in mexico? >> where do you have the opportunity to mobility other than here? >> united states has immigration, imagination, intense fiction. >> exactly. >> it is the place -- our best days are still ahead of us. >> i could not agree more. all our financial advisers the world as we know it is not the end of the world.

>> shiny city on a hill. >> we have all these things going for us. >> all right. we're going to continue this conversation. a lot of names out there that you can play on. still to come this morning, we'll talk about why johnson & johnson is another name that david darst things will be winners >> up next, though, steve liesman releases the latest from the all american survey. america's views on housing, stocks, wages, inflation. we dig deep when "squawk box" comes back. it's a brand new start.

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let's get to steve liesman with the results from the all america economic survey. >> this is the cnb all america survey, a poll of 800 americans nationwide. same guys who do nbc/wall street journal. we want to get people's views on things like housing, stocks, wages, inflation and the economy overall. we have had interesting movement in from quarter to quarter. let's go back six years ago when we started this survey. it's up to 54%.

go back six years. 48% thought their home price would increase. only 9% thought it would decrease. 30% thought it would decrease in march '11. now a nice bump. 33% from 24. so in a post crisis high among americans who believe their home price will increase. let's talk about what that value is. it's not a whole lot. 1.6%. big turn around from november. there is the low. 1.6. there's the high, 4% when we started doing the survey back in march 2007. that's one important. home value expectations, what about their views on the stock market? back when we started this survey, 2007, 49% thought it was a good time to invest. 27 bad. you can see it's been reversed ever since. finally, guys, back together

39%, 40%. once again we look at the financial lead. $75 now of income. there are also more bullish on the stock market than they had been. now, you would think with all this good news that views on the economy would be better. but they're not. and the reason is because wage expectations have come down. inflation expectations have come up. we think of it has a four-legged stool. two on the up side. we will get the other two on the up side in order to get better views overall on the economy which remain pretty depressed compared to how they were before the crisis began. coming up, mechanic's view on the sequester and on how to solve the deficit. and you can read all about this on cnbc.com. who do i go back to? andrew?

>> that would be me. we'll talk about this in the next hour? >> whenever you want. >> my microphone has just fallen off. david durst, why he thinks tech oil drillers and health care providing great opportunities for investors. and two techs duking it out. microsoft versus google today. who moves to the next round? ♪ ♪ here we are, me and you ♪ on the road ♪ and we know that it goes on and on ♪ [ female announcer ] you're the boss of your life. in charge of making memories and keeping promises. ask your financial professional how lincoln financial can help you take charge of your future. ♪ ♪ oh, oh, all the way ♪ oh, oh

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welcome back welcome back to "squawk box". we're doing our what's working segment. david darst is the chief investment strategist. we talked about apple already. i want to talk about johnson & johnson. >> alex gorski the new ceo is phenomenal. a michigan boy. spent the whole life selling for j&j. comes back, becomes ceo. he's in his mid-50s. i met with him a few hours. i did some homework.

proctor & gamble, 20%. in the diagnosis, okay, in the medical device, which are the largest now in the world. and pharmaceutical piece. 70% gross margin. the company has $70 billion in equity capital, 12 billion in debt and earn $14 billion a year, 20%. we love the global guerrillas. they sell cheap valuations. stock is $75. >> global bohemoth.

>> the wave is taking place in other parts of the world. southeast asia will add another china to the world. philippines, indonesia. they will add 1.3 billion people. >> you're laughing. >> i thought you said beameth. >> why say all the syllables if you can do it quicker? >> you could read the manhattan telephone director out loud and we would watch you. >> slumberje, mexico, russia, nobody can touch their oil. these are the new oil pages.

these companies are beautifully positioned. >> 10 seconds on microsoft, the stock that has not moved. >> microsoft we like because we think the margins there can expand. we believe they're coming with new products, enhancements. the stock is cheap. >> evaluation play. >> oh, my god. >> i know. >> i'm looking at a 10 year. you'll love this, joe. 10 years ago the market cap. apple was 15 million. apple is 927 times 400. 300 billion.

>> i would rather short google and own microsoft. people have always done this. maybe some day it will. >> the big tech story of the world today is basically the computer is this. the computer is this today. it's no longer microsoft. >> but you need a cloud. the big geo-political stories of the world are the rise of china, arab sprain, and europe trying to redefine itself. i would add a fourth one the resurgence renaissance recovery of the united states of america. >> thank you, david. thank you. >> our best days are ahead.

>> a lot of people getting old. >> we're bring anything immigrants like crazy. young people. they're having kids. it's fantastic. >> david, you're on fire. let's have you come on on a day we have a normal person. only one moves on to take on facebook. will it be microsoft. >> he's a beameth. which do you think would be better? [ penélope ] i found the best cafe in the world.

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welcome back, everybody. we are nearing the end of the first round of monday madness stock. ibm with 67% of you voting on cnbc.com show page. >> really? >> today's contest, another battle of the tech tie ans. google versus microsoft. ed maguire senior analyst at clsa. i hear you're stuck in traffic. sorry to hear that. >> our view is that microsoft enterprise business is really under valued here. a huge amount of visibility as the company made this transition

from being software to software. unearned revenues is improving the visibility of revenues. the pc business has been -- the sentiment is about as low as it can get. even with improvements that might come from $600 laptops with touch capability could drive up side. and there's down side production with dividend yielded 3.3%. great cash flow sorry. strong enterprise franchise. >> your target is $36? >> that's right. >> that brings us from 28 today. you think think this will be a breakout period between now and the end of the year for microsoft? >> we do. >> you're talking about google. you have a price target of $850. why do you get there? >> well, i think in fact, we

could see at least 10% to 15% as we roll forward our estimates for the year. first off, google's core search business is extremely healthy, a cash cow. secondly, mobile computing. a huge tail wind for google. they own one of the two dominant operating systems on mobile android and some of the most popular apps with youtube, g mail and google apps. it is in a significantly advantaged position. >> colin, the biggest thing that can trip up google? >> competition from facebook is one as social signals become more important. and motorola in restructuring. >> colin, ed, gentlemen thank you very much for laying out

your case. folks at home, if you don't know how to play so far, vote for google or microsoft. the question, which stock do you think will be the best performer between now and the end of the year. if you had to pick between now and the end of the year? >> we love google, $38, the cash is going to be king. go with microsoft on this one. >> thank you very much. folks, thank you for playing at home. and vote today. >> coming up, we have the results from cnbc's all america survey. and breaking economic data that could move markets this morning. the latest read on durable goods for february. numbers are ahead. here are the futures ahead of that data. "squawk" is coming right back. carfirmation. only hertz gives you a carfirmation.

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cyprus bailout sparking fears it could be used as a blueprint for future action. can bulls shake off fears or

will stocks suffer another day of losses. more americans thing spending cuts alone are the answer to our problem. steve liesman joins us with more results from all america economic survey. >> and it's a big week for real estate data. we'll get the post on the housing recovery from rxr realty. third hour of "squawk box" starts right now. welcome back to "squawk box" here on cnbc. our guest host this morning is

david darst chief investment strategist at morgan stanley wealth management. he's not like the second investment man. he's chief. >> wouldn't you like chief in your title? >> we'll give you a title with chief in it. >> two more words that go along with it that people say as one word? royal a-hole. >> that's not where i was going. >> and jim keenan, head of leverage finance and high yield. more from david and jim in just a moment. >> in our headlines, the banks at cyprus will remain closed two more days as authorities worry about a possible run on banks. they are scheduled to open on thursday. atms have been operating. a lot of them have run out of money. more from michelle a little later this morning.

carl icahn is talking about possibly teaming up with dell. that bid came from ceo michael dell and his partners. yesterday after all that volatility, all the moves ups and downs as you worried whether cyprus was a blueprint for the rest of the eu or not. up 27 points. we had seen 45 points or higher. overseas in asia, you saw the nikkei close by 0.6%. shanghai down 1.25. we have seen green arrows. their gains have really come back down as well. early this morning the cac in france up.75. now it's up only 5 points. ftse and the dax have turned slightly into the red. >> okay. we have a fun story i think for

us. one of the original members of the "squawk box" disruptors club made the big league. nick had told his app to yahoo!. reports put the price tag $30 million. it turns news stories into chunks that are readable on small smartphones. >> i'm really excited about joining yahoo!. i think it's one of the classic internet companies, content portals and new leadership under marissa myer. after speaking to their team, they have all of these assets they have had since the '90s. all they need to do is package it up in a beautiful experience. there's a real opportunity there. >> you've got to love that.

>> talking the talk, walking the walk. >> it's all work. >> i love what he was telling us. he said, too, what are you going to do with that money? buy a computer. he said what about a car? he said i'm not old enough to dry. >> start a trust fund for his education. >> start your own trust fund for your education. he's still got a year and a half to go. >> in high school. >> is he going to commute? we asked him that. i don't remember what his answer was. that's right. he was trying to finish school. >> it comes so naturally. i do think it's easier for that generation. >> not that easy. that kid was smooth. >> he is. but you understand. how many apps on your iphone? i have an ncaa. i follow the scores. that's it. and skiing thing. i find out when the snow in, you know, copper.

>> that's all you really have? >> yeah. >> you were ordering black cars when -- where is your car? you were ordering black cars when people didn't know what they were. >> uber. >> it's pretty cool to call and there is one in the neighborhood. great business model. pandora. >> you have pandora. >> no, i don't. no. >> moving along here. >> steve cohen. >> that's interesting. >> page 6 this morning. >> this is new york post, page 6. >> disclaimer because we don't know what it all means. steve cohen just bought picasso. they say it was a present to

himself. he bought it from steve wynn. he bought it a couple years ago. >> i would say that was more than four years ago. and he was to pay $139 million. but then steve wynn put his elbow through the painting. nora efron coughed it because she was there. now he sold it for even more. steve wynn, took it back, patched it up. for $15 million more. >> that's got a great story with it. >> it's just a chip these days. a piece of canvas that somebody with a magic marker could deface. this was owned by john langlath lobe, sr. he and his wife married for 72 years. >> wow. >> and they owned this paintedng. >> 72 years is twice as long as van gogh lived. and here we go. they own it for 72 years. it goes up slowly, 11% a year through the compound. now it's just a piece of canvas

being traded around because money is losing its value. >> your paint is the dollar is worth less. >> that's right. when i taught at harvard business school we used to give the kids a question at the end of the year on van gogh which was sold by 55 million. 17% per year. one of the students wrote to me that van gogh's sun flowers was sold earlier that year for $39 million. she worked out there were 18 sunflowers $2, million per flower. and mrs. peson, 1.1 million per flower. she said as well as she did she could have done 86% better had she had abscess to a can of yellow paint. >> i should point out whoever the source is for the article said it was supposed to remain a secret because he did not want

to appear he was snubbing his nose or celebrating to the deposit because there is still a criminal investigation ongoing separate from the civil case that was just settled. $600 million. $615 million. he's spent a little bit this month. >> enemas 20? >> i think he's over 20. a big credit card bill this month. so there it is. >> cyprus financial crisis narrow averted for now. ecb now facing bailout fatigue. new edge group senior director of u.s. credit equity and in policy. a strategist. thanks for coming in. >> hi, joe. >> good to see you. one thing i have loved is how many different ways. it ex papdz our mind. not only when things happen but in answer to when things rear their ugly head. this was interesting, wasn't it?

>> we're essentially in 2007 to 2013 information for text between public bailouts and private. so we're in this transition. what they don't understand is the verbs and pronouns that roll off their tongues can massively impact the capital markets. because we're moving to the private bailouts, the bail-ins. that's what you saw yesterday. and i expect a lot more going forward. >> from where? >> we have this amazing renaissance of natural gas. everybody doesn't want to look at it. we still have a banking system that is 5 to 7 times more levered to gdp than the united states of america. so you're talking a lot of risk. now you have a lot of weak banks that have to be bailed in of

which debt holders, depositors will take the hit. >> for all the talk yesterday and for all the concern, kwraouyou know it is the blueprint for what comes? >> i would say just look at the last month, two months. the bank of ireland took a hit on the senior debt. three weeks before that the s and s bank. i would say you can't look at it as a blueprint. the scary thing is human beings are makiing decisions that the free market should be making. >> it's capricious. you had numbers just talking about, the different european

countries. and the ratio to gdp they were kind of scary. >> yeah. i took the average 5 to 7 times. with all we went through in 2008. >> less than 1%. >> if you looked at the united states, we had a much bigger household problem. european households are not levered. banking system is incredibly levered. they are unique cases. you have to look at the banking system different. it is very levered. local gdp. cyprus eight times gdp. >> what did you have on top, luxembourg? >> why don't you as a long term whenever the euro gets there long term. >> not to mention, joe, i've

been tweeting about that. the stronger it gets the more tkdecimated they get. >> they can't do it by country. if you add everything up is there any way the standard of living for the average person in europe suspect going to get a haircut of the devaluation of the euro. you're going to make money, aren't you? >> i would be shorting the euro. >> what about the next five years? how does this work itself out? russia had to devalue. south america. the only way out long term is devaluation. >> well, think about what andrew and i went through on our box with the financial crisis. five years ago you had hank poulsen with winners and leaders. >> with people you liked or didn't like, according to andrew. then you had g.m. so you had the president eft united states picking winners and losers with bondholders.

let's be clear. then you had the greek situation. private sector bill. then what we have had the last month. so going forward, you're seeing a transition to private sector involvement and bail-ins. >> at you take those examples, why it is a unique case, compare g.m. and chrysler. the balance sheet was secure because of the lbl. g.m. was largely unsecurity. so how cyprus banks will be done versus a weaker spanish bank. >> larry is bringing up a phenomena knoll point which your viewers would be very well advised to take note of. the dollar is undergoing a strengthening period here.

it will last six, seven, eight years. 85 to 92. right in the middle was the 1987 russian debt crisis. and 82, by the way, was mexican brazil, argentina. money leaves these places causing inflation to go up. it hurts their economies. emerging markets are acting like death. the second 92 to 01. if this dollar continues to strengthen somewhere there will be something like the mexico, brazil, argentina or russian default or the 1997 asian debt crisis. >> what did it used to be? >> i don't know. >> do we know? >> i'm guessing the drag ma. >> larry, thank you.

coming up, more americans think spending cuts alone are the solution to our definite it. steve liesman is joining us next. check out the squawks box market indicator. ♪ you know my heart burns for you... ♪ i'm up next, but now i'm singing the heartburn blues. hold on, prilosec isn't for fast relief. cue up alka-seltzer. it stops heartburn fast. ♪ oh what a relief it is! no they don't. hey son. have fun tonight.

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welcome back to "squawk box", everybody. steve liesman is back. steve, what can you tell us about this time? >> becky, this is only interesting when stuff changes. stuff changed when it came to americans's attitudes on the sequester. our poll found it very interesting change here. let's look where they were back in november around the election about how to cut the deficit. 3% said do it with tax hikes only. 16% in spending cuts only. very little support for tax hikes only. 12 points up. 55% want a combination. but 12-point drop.

what's interesting is it was entirely driven by changes in republicans's attitudes almost entirely. 28% republicans back in march. now it's more like 50% if you look at the current results. a slight change of 6% to 13%. but republicans less inclined in part because there were in fact, tax hikes. 15% unsure. 27% say they expected to have no impact. 40% say it will hurt the economy. do i combine them? just come over here for a second. i get 45%. the question is whether or not

president obama is making his case about the danger of sequester. i want to point out zoom in on this word "agree." all the other posters say who do you blame? we don't ask that question. it presumes there's something wrong with it. we asked a neutral question, who do you agree with? 31% supports obama. 25% the the gop and congress. and this is the big one here, 28% say neither. again, i don't understand the political implications of that. does president obama count that as a victory or is that a defeat and 28% say neither side? becky, those are the results. all of this, by the way, online. more coming up in the 10:00. right now these are the political results of our cnbc all america economic survey. >> let's bring in john harwood.

these are excellent questions steve has raised. you look at numbers like this. you see a big swing. what does this mean to the white house and to congress? >> well, first of all, the the blame question i want to make clear, i blame liesman. what we're seeing in these numbers is the same thing we're hearing from house speaker boehner, for example, when asked whether he will support additional revenue. what he says is president obama got his tax increases. so the fact that that did happen and the fiscal cliff ritz went up on people over $400,000 caused the numbers to drop among democrats to some degree. the challenge going forward for the president is not to make his case per se on the impact of the sequester. events have got to make its case. because if it doesn't, if people don't feel it. >> john, i miss you.

this is the perfect segment. >> you saw the closure, joe, of the airport. >> that's what i want to get to. >> you saw a lot of squawking from politicians and both parties. >> right. >> that's the kind of thing that could -- >> stay with me here, john. because that's where i wanted to go. i missed you. in the journal today, one of the lead editorials talks about a bill amendments sponsored by republican senator jerry moran of kansas that proposed taking $50 million of savings from unspent balances which is an agency slush fund. you could have saved the 50 million and there would have been no faa cuts. they would have all stayed open. harry reid refused to bring it for a vote. at midnight he got rid of the amendment. do you think there's any truth to the notion people are hoping they prove the president right?

>> yes. >> that's bad, right? we should not be compromising safety for someone to be able to say i told you so, we shouldn't have done this. there's ways of getting around and targeting where we do the cuts. i think that's irresponsible, don't you? >> look, i think there's ultimately no getting away -- there is no magic formula for making cuts disappear and not matter. you just can't do it. >> john? >> yes. >> i was told by somebody in administration one of the things he may have done is underestimate. they thought that was going to be the trigger. >> no question about it. absolutely right. >> yeah. >> there is no group above 7%

when it comes to those who want to solve the deficit with tax increases only. and only two groups barely in double digits when we say we should not cut the deficit at this time. it is broad based. it seems like the issue of doing so with spending cuts only has a certain momentum. we will see whether or not that conditions. >> thank god you're back for the sweet 16. geez. you've only lost one. i can't wait until thursday. >> you're in for us? >> my daughter has duke winning it all. me and the president bipartisan. how? by building custom security solutions that integrate video, access control, fire and intrusion protection. all backed up with world-class monitoring centers, thousands of qualified technicians, and a personal passion to help protect your business.

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>> we are >> we are a few minutes away from durable goods. numbers and the market reaction when we come back. as he head to break, u.s. equity futures. we are looking at green arrows this morning. right now the dow is up 40 points above fair value. squawk will be right back. e to rise and shine. with centurylink as your trusted technology partner, you can do just that. with our visionary cloud infrastructure, global broadband network and custom communications solutions, your business is more reliable - secure - agile. and with responsive, dedicated support, we help you shine every day of the week.

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seconds away from durable goods numbers for the month. >> february durable goods headline up 5.7. that's more -- much more significant to the upside than the expectations of 4%. and our last look improved from minus 5.2 originally released in january to down 3.8. transportation down half of 1%. this isn't a terrific number. we're looking for the mirror image. up half of 1%. last month up to 2.9.

let's look at capital goods orders. aircraft for capital business investment. and that is down 2.7. down 2.7. that's very depressing actually. even though our last look like all the other numbers, january was upgraded to 6.7. originally released as 6.3. if we look at the shipment side versus order side, that was close to expectations, up 1.9. so to summarize, one of the proxies imbedded in this number is twice what we expected to the negative side. but the headline number 5.7 is pretty good. everybody knows it's a volatile series. many like to look at a couple months running to get a better picture. what's the response in the marketplace?

193 yield. we called up 27. in cyprus, well, people over 100 grand aren't going to be able to get all the dough in the bank. do you have a bail in, bail out or bail anybody? you have to open the banks. we will see how that goes. back to you. >> all right. for more on the numbers, let's get to steve liesman. lots of incomes. if you've got these numbers separate from your all american numbers. >> there's a lot of numbers going on. i think rick said the right word. it's volatility when it comes to this number. you were plus 3.6. now 5.7. a big part has to do with aircraft and how the government counts it and the delivery by boeing. if we look at nondefense. minus 3.2. plus 95% in february. so i don't know if they delivered a lot of planes or the government just wanted the planes they delivered.

in general, the business investment proxy has been doing quite well. it's minus 2.7. rick is correct. it's about a point and a half worse than expectations. but we did have the 6.7% jump in january. it seems we're still on track for business investment to add to gdp in the first quarter. i don't know if mr. darst has capital goods companies and whether or not they have been a good play. >> we like the industrials. they have a global guerrilla expect. you want to look at hiring. you want to look at the fourth piece. profits. so we're wondering whether they're going to come through. they start the earnings season very shortly. and this is connected to the goods orders. thirdly, personal income. that's the wages you show over there in the survey. wages are just hang anything

there. finally, political developments as the same degree of dysfunction. some day we will have tip o'neill and jerry ford playing golf again. that will be one of the three component epbts. it will be political resolve. >> compelling valuations and structural reform. those are the things they have as an 18-year bull market. we're in a dating market not a marriage style market. opportunistic trading range. >> let me throw out they of the company. he said when he looks at the trains and the trucks we are in a low to zero growth economy. that has been a very good indicator of what has been

happening. signs that the global economy has taken a turn for the worst. >> the data in the u.s. has been the opposite. it's been better than expected. following the transports. >> it was at least one thing. i didn't mean it in a negative way. >> okay. anyway, it's been worthwhile to follow it. interesting way to think about the market. >> this early year data because we came off so much in the wake of the lehman crisis that the seasonal adjustments have not

really caught it. i find it incredible that the data hasn't caught up with it yet. we have had this pattern of better than expected numbers in the wintertime. and i know one thing the fed is guarding against now is the notion of the spring swoon. i could see them dialing back a little bit on purchases but not until then. >> some of that has been the trend. the timing of the central bank policy responds. and one off events. arab spring can cause some of that seasonality. overall if you just look at the trend, things are getting better f. expectations are high they might be disappointed. the reality is the sustainability from household consumption is starting to grow.

debt levels have started to come down. business sector, delevered for five years. >> big odd man out is the effect of the sequester. economists are looking for a half point. dudley said yesterday total fiscal drag of 1.75. there's this view from jim o'sullivan, high frequency economics. he says what we have had the last several years is a winding down of the stimulus. it will be replaced by, not in addition to. i think there are marked implications too. >> it happened with the last jobs report. the market was teetering on unsustainable gains. it took off and went to another level. i love seeing where the market

gets up to a point where people think it's out oversee skis. if we go up 20% you will likely see this pattern continuing where we don't see -- >> rick probably doesn't think so. you think sit fed induced and not real. i don't know. the market could make a believer out of you probably. >> hey, joe, if you're skiing on real snow or artificial snow, can you still get out over your skis? >> yeah. that's good. that's true. >> there you go. >> the manufacturered snow, you can get a 50-inch base. >> i've said a thousand times since march of '09, if not sooner, i would not tempt fate. but there is a certain amount,

some percentage that the fed has created artificial snow. definitely a percentage where things have improved. and the second definitely affected my opinion more by father time than the programs. you can cash a check if your low on stocks. if the the answer is yes, and i can't see that it is. how does the market throw back? it's a hissy fit. it's all down the road at some point. >> they removed it in the 50s, didn't they? >> i think it will overtime. i don't see why people think the fed won't -- by saying that,

joe, you're saying the fed might tolerate inflation. i don't think that's true. i don't think that's been true all along. they have had leeway to do what they have done. >> i don't want to get you guys started. >> just tell steve to buy all for his ira and in 30 years i will lend him money. >> all tips. i would make money, joe. >> what it means is the government makes the al going rhythm for the the payouts. >> you say they make up the number. okay. >> signs of a real estate recovery in new york city. we'll talk to one of the largest real estate overages. managers and developers in the area. chairman and o of rxr realty next. [ male announcer ] i've seen incredible things.

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backelcome welcome back to "squawk". our next guest said the psychology has shifted in that the finally in full gear. he is bullish on manhattan. chairman and chief executive officer of rxr realty. why are you so bullish on new york city? >>. >> i have been for quite some time. we had a public company. sold it in 2007. in august of 2009 began to be a big buyer. since then the most active. >> what are some of the things

that will happen? you have cornell coming out. you have new building coming out. >> great supply and demand. how much demand is there and limitation and supply. it's a market that's recovered. bear stearns. it's proven to be resilient. >> a lot of office space coming online. >> you have to break into pieces. at the end of the day, new york has a tremendous amount of pent up demand in media and technology. they will start playing offense again in 2013 and 2014. you see capital and companies from around the world. so you will have some supply. but if you look at a total

market it's 2%. >> where are you on housing in new york city? >> it never went down. everyone said it would go down. >> that's one of the big factors i don't think people give enough credit. housing is between $4,0006,000 a square foot. the largest delta between residential. >> say that again. >> what's the spread? $4,000 to $6,000 per square foot for residential housing. office space, $1,000. it's four to six times as much. what's happening is you take the sony building. we looked at it for office space. i traded $1.1 million. people will buy it, convert it to a hotel and residential. and squeezing out more office space. there was the same amount today

as 20 years ago. the average age is 50 years of age. it doesn't play for the modern and 21st century . >> a have you thought about the markets or not . >> a have you thought about the markets or not really? >> i'm a believer that real estate is a local business. so we focus on new york and a 50-mile radius. we live and breathe that marketplace. that's where we operate. >> okay. scott, thank you for being here. >> when i left goldman sachs to go to zurich they gave me a button that said when you leave new york you ain't going nowhere. >> if you can make it there you make it anywhere. >> we have breaking news.

there's a story just crossing the wire saying it is amending its agreement with berkshire hath away. it did come with warrants. warrants that he could exercise. he would be exercising that agreement. but this is changed to that agreement. buffett is quoted saying we intend to hold a significant investment in goldman sachs. i did my first transaction 50 years ago. they have a they're pleased they plan to keep them as long-term investors. the right to purchase 43 shares of common stocks. at that exercise price of $115 until october 1st of 2013. under this they're going to be changing it.

they will be delivering to berkshire the number equal in value to the difference between the average closing price over 10 days preceding october 1st, 2013 and the exercise price of 115 multiplied by the number of common stock of the warrant. >> so not buying all the shares. he's buying whatever profit he has. >> in shares. >> with g.e. he had an unbelievable difficult deposited. does he have 10%? >> they called it. >> all he has are warrants now. >> these are warrants already paid off. >> right. >> so basically he's taking shares instead of cash, is that what's happening? >> yeah. >> well, he's not taking 47 million shares. >> 43 million. >> the difference is 115 and where it is on october 1st of 2013. he's getting that many shares. take that in shares. >> doubling down. i want this all in shares.

>> he's getting less than if he took the shares. if he got all 43 million shares it would cost him 115 times 43 million. instead, he's taking the profit he's got and using that profit to buy the shares. >> that's interesting. >> we've got to listen to the man. he took over berkshire hath away in 1965, 38 years ago -- 48 years ago. book share was $19 a share. today it's $100,000 a share. 19.2 compound rate of return for 48 years. >> wow. >> is there anything you don't know? >> i just did that in my head. 19.3%. >> coming up, find out what jim cramer watching ahead of the opening mail. we'll check in. >> goldman sachs shares up.

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>> >> no experience. welcome back to "squawk box." let's get down to the new york stock exchange. jim cramer, cramerica, joins us now. i don't know, durable goods. i'm not saying durable, can you? >> i'm staying wrapped to the show because my old friend is there. >> crazy. it's like rain man. >> go phillies, i love you. go phillies. >> we'll do final four if we do it with him. he's the guru of that, too. if we'll waste time we have to waste it on basketball. are you counting down the seconds, jimmy, until thursday? >> i have to tell you this lasalle peck. i do think that there's some worry. i do like louisville right away. some people say paper tiger, i

think they're van gogh. >> you heard the colorado state coach. he looked like he had been through a war. they come and they keep coming and they keep coming and they never stop. he was, like, slapping himself. indiana, you have to have that game with temple, the great teams, the ones that win have a game like that. >> yes. >> but that was constant loss. anyway -- go ahead. >> my late mom went to temple and right before my mom passed away, david came to the hospital to see her, and i'll never, ever forget it, david, i love you. and that's one of the reasons why i do. >> you're the greatest and your mom is watching the show and she loves you. >> thank you, david. thank you. >> we have a "squawk box" here now, jim. >> now everybody just does it on an iphone and not a blackberry. david may remember the goldman days where mario -- and we would just laugh about european stocks, remember, david? we never cared about europe. >> i sure remember that like it

was yesterday. thank you for your great -- your great insights and your education of the young people about investing in this country. great work. >> remember, david -- thank you. greek -- i remember levi told me 2% on greek urns. he had one that was thousands of years old. we forget some of the returns are for some of these heirlooms and antiques. >> all right. jim, do the numbers hold up, do the economic numbers hold up or does the sequester hold in. i think they hold up and chris matthews writing a book right now about tip o'neal and reagan. if we got any compromise in washington, there's no stopping this market. in the interim, i like the industrial production and i like the durable goods and we'll be talking home sales and i think home sales are excellent. there's enough good. it is interesting to listen to the hotel market in new york and we need commercial construction to pick up. i think that's the next leg and that's why i like the regional

banks. commercial real estate, third and fourth quarter is where we should go. >> the housing stocks, jim, are up 150%, but they're 52% below the old highs. is there still mid-hanging fruit? >> gotta go. >> i would prefer radiant. i can't believe it's alive with pleasure. that's mortgage insurance. >> is o'neal wearing another shirt from the sorkin collection? check it out. i'm watching quintanilla, man. that was wild yesterday. i don't know. >> we'll get the last word from the guest host, incomparable rain man himself david dhars and the wonderful jim keenan, plus squawk booze news. stick around right after this. [ penélope ] i found the best cafe in the world.

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